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Medicare privatization proves costly

The Medicare Modernization Act of 2003 ratcheted up Medicare payments to private plans and could see one in four beneficiaries in such a plan by the end of the decade. But the trend is not an efficient one. Today’s EPI Snapshot notes that Medicare pays private sector providers 12 percent more than it costs the government to provide these services directly.

EPI political analyst Monique Morrissey examines the rapid growth of these private plans and finds they are often more costly than the old system. The markups for private fee-for-service plans, which mimic Medicare’s fee-for-service structure, are 19 percent over the cost of government-provided Medicare. Moreover, the Congressional Budget Office estimates that ending overpayments to private plans would save $54 billion over four years – money that could be used to insure low-income children.

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